Crafting Arbitration Clauses - How to Avoid Unwanted Consequences

In the recent decision of AT&T Mobility LLC v. Vincent Concepcion, 563 U.S. __ (April 27, 2011), the U.S. Supreme Court reaffirmed its long-standing support for arbitration, even in the face of efforts to limit it, holding that a California Supreme Court decision limiting class action arbitrations was pre-empted by the Federal Arbitration Act (“FAA”). The Court relied on prior decisions that, “place it beyond dispute that the FAA was designed to promote arbitration,” and describing the FAA “as ‘embod[ying] [a] national policy favoring arbitration.’ Buckeye Check Cashing, 546 U.S., at 443, and ‘a liberal federal policy favoring arbitration agreements, notwithstanding any state substantive or procedural policies to the contrary.’ Moses H. Cone, 460 U.S., at 24 … ” Id.

Despite the Court’s endorsement of arbitration, the process has, by some accounts, become a victim of its own success. Parties increasingly complain that the purported benefits of arbitration — time and cost savings, efficiency, finality of the result — are being lost as counsel more often employ traditional litigation techniques that bog down the process.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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